Can you afford to go solo? DIY investing vs relying on the experts

Directions: You could get help with investing from an IFA or take the DIY route

Sifting through the plethora of investment products and jargon can be daunting, but you don't have to do it on your own.

There are two ways you can invest, using a financial adviser or ditching the middle-man and accessing a DIY investment platform.

We weigh up the pros and cons of the two approaches.

Seeking financial advice

There are a number of routes available to you when seeking professional financial help.

One route is to try your bank, but keep in mind that you will only be offered products from the one financial institution which may not be the best you can get on the market or the most suitable for you.

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Another is using a financial adviser. You can either use an independent adviser who will search the whole of the market, or a restricted one that offers a specific range of products.

An IFA will check your entire financial situation, suggest a suitable financial strategy and then comb the entire market for the best financial products available to fit your needs.

They can help with sorting out your pension and give investment advice on buying funds, an Isa or just managing your cash efficiently.

Since 2012 advisers have been banned from receiving commission on any new advice and instead have to charge fees. This is part of regulatory changes called the Retail Distribution Review, which banned commission and imposed minimum qualifications and standards on financial advisers.

This charge can be on an hourly basis or a percentage of your assets.

Some advisers won't charge you anything just to have a chat, but others may have a fee just for a consultation, while some may have a minimum amount you must invest before they even consider working with you.

It is important to clarify how much you will be charged before taking advice.

The decision to use a financial adviser really comes down to how much time you have and how involved you want to be in the investment process.

If you are just putting money into cash Isas, you could probably do this yourself, but if you want to put money into products such as shares, funds or investment trusts, an adviser can offer expert support and save you time.

Setting up and monitoring an investment portfolio can be time consuming and difficult if you do not know much about the financial markets as you need to weigh up the risks and make sure you are getting the balance right in where your money is going.

You also need to have the time and discipline to keep an eye on your portfolio to make sure it is heading in the right direction.

If you are uncertain about how to find the best funds or shares and build a balanced portfolio, then using an adviser may be the best route fro you.

WHAT TO EXPECT WHEN YOU ARE INVESTING

The Money Advice Service has
highlighted four questions to decide if it is worth using an adviser to
help manage your investments.

Do you have the time to do the research?

Do you have much experience, knowledge or skills when it comes to investing?

Can you afford to lose any money?

If things go wrong, are you comfortable taking responsibility for any bad investing decisions?

The advantage an adviser offers is that you have an expert you can consult when managing your money. This means you are getting help to make a decision rather than just making it on your own.

If you feel you have been missold then you are able to complain to the Financial Ombudsman Service, once an issue has been raised with the adviser. You cannot complain just because your investment falls in value, but can raise an issue if you feel the risks weren’t adequately outlined or you weren’t told which products you would be investing in.

DIY investing

If you have confidence in your own investing abilities, then armed with a computer - or in some cases even just a smartphone –you could use a DIY investing platform.

Investing platforms offer access to funds and shares as well as research and tools to help choose products.

They do not offer advice and only offer guidance so the final decision is up to you.

You will have to pick your own holdings and also make sure it is appropriately balanced so you are not taking too much risk and are appropriately diversified.

You can get help with your decision-making though as many platforms will have risk profiling tools that match a portfolio to your investing style.

You can also get investing ideas from platforms that offer fund ratings. For example, Hargreaves Lansdown has a Wealth 150 range of funds its analysts believe will outperform in the future.

Some platforms will offer ready-made portfolios based on your level of risk or goals which means you don’t have to worry about fund or stock selection.

A platform will usually charge an administration fee, either a percentage of your holdings or a flat fee, and there may be charges for dealing.

All platforms have different functionality and some are better for pure fund investors while others may be more suitable if you are interested in stocks and shares.

Your platform should also be regulated by the Financial Conduct Authority, which means you can complain to the Financial Ombudsman Service, if you are unhappy with how the business deals with any complaints.

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